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Ship-breakers sailing towards 10% revenue growth



Growth chart. (File Photo: IANS)

The Indian ship-breaking industry is sailing towards a 10 per cent revenue growth this fiscal on-year owing to improved availability of condemned vessels and higher rates for steel scrap, Crisil said on Monday.

According to a report by the ratings agency, a plunge in global trade due to the Covid-19 pandemic weighed on sea freight, hurting viability of shippers and making more vessels available for dismantling at cheaper rates. Consequently, from the second quarter starting July 2020, there was a sharp rise in the number of vessels bought for breaking, compared with muted activity in the first quarter.

The procurement price of ships condemned for dismantling was down by over $75 per tonne, averaging at about $320 per tonne for the first six months in current fiscal when compared to corresponding period of previous fiscal, thereby making it lucrative for ship breakers.

Rahul Guha, Director, CRISIL Ratings Ltd, said: “Indian ship-breakers are set to procure between 230 and 240 vessels, with a combined weight of over 1.9 million light displacement tonnage (LDT) this fiscal, compared with 214 vessels weighing 1.77 million LDT bought last fiscal. Meanwhile, steel scrap realisation has also improved to Rs 27,624 per tonne on average this fiscal compared with Rs 26,558 per tonne last fiscal. As a result, the industry’s revenue is likely to increase 10 per cent on-year.”

Usually, the vessel procurement rate is about $20-30 per tonne higher than the steel scrap selling rate, which indicates ship-breaking is a loss-making proposition.

But the key to profitability lies in the sale of higher-value non-ferrous metals, oil, and furniture found on condemned ships, which form a sizeable part of the vessel scrap beyond steel.

A vessel typically comprises 30% of such non-ferrous products and 70% steel. Sales of non-ferrous products offset the loss incurred in scrap steel sales and operating overheads.

The operating profitability of ship-breakers could see 250 bps expansion on-year to about 5% this fiscal because, for a large part of the year, scrap-steel rates have averaged $30 per tonne higher than vessel procurement rates, while foreign exchange rates have remained steady, the report said.

Neha Sharma, Associate Director, CRISIL Ratings Ltd, said: “An improvement in operating profitability would shore up the industry’s interest coverage to about 3.5 times this fiscal from 2.4 times last fiscal, supporting the credit profiles of CRISIL-rated ship-breakers. While steady demand for steel and continued momentum in vessels beaching for dismantling would drive industry revenue up 10-15 per cent annually next fiscal. This will bolster the overall credit risk profile of the ship-breakers over the medium term.”

India has enacted the Recycling of Ships Act, 2019, and joined the Hong Kong International Convention (HKC), which sets the standards for ship recycling. Of India’s 150 ship-breaking yards, 90 are HKC-certified, giving it an edge over its closest competitors, Pakistan and Bangladesh, which have not yet acceded to the HKC.

These three Asian neighbours dismantle more than three-fourths of the ships globally.

The government envisages doubling of India’s ship recycling capacity by fiscal 2024 by targeting more scrap vessels from the European Union leveraging HKC. That should help the domestic ship-breaking industry, which is looking to widen the gap with neighbours and cement its pole position.

The Union Budget for the next fiscal announced a reduction in duty on imported steel, which could lead to dumping from China and softer scrap rates. Increasing trade volumes in post lockdown period, has sent freight rates soaring, thereby bringing back lucrativeness in sailing vessels. As a result the supply of vessels for dismantling has been restrained in turn leading to firming up of procurement rates in the past three months. This could lead to moderation of operating profitability next fiscal. Any sharp drop in scrap prices will bear watching.


TASMAC sold Rs 164 cr worth of liquor in just one day




The Tamil Nadu State Marketing Corporation (TASMAC) has sold liquor worth Rs 164 crore in the state in just one day.

All liquor outlets and bars opened in the state on Monday.

According to reports from the TASMAC, Madurai zone accounted for the maximum sales of Rs 49.54 crore followed by Chennai region with sales worth Rs 42.96 crore, Salem Rs 38.72 crore, and Trichy region accounting for the sale of Rs 33.65 crore worth of liquor.

However there was no sale in the Coimbatore region as the shops are closed in the area following the higher number of Covid-19 cases. Shops in Nilgiris, Erode, Salem, Tiruppur, Karur, Namakkal, Thanjavur, Tiruvavur, Nagapattinam, and Myladuthurai remain closed as the number of cases are high.

Of the 5,338 shops in Tamil Nadu, 2,900 reopened on Monday.

The founder president of Pattali Makkal Katchi(PMK), Dr S. Ramadoss has called upon the state government to rework its policy on liquor and to enforce a total prohibition in the state for the health of the people of the state. He has also said that the claims of Chief Minister Stalin that TASMAC shops were allowed to function following the brewing of illicit liquor in the state as well as to prevent smuggling of liquor from neighbouring states.

Ramadoss has in a statement said, “Stalin should work his way to enforce total prohibition in the state of Tamil Nadu for the sake of the health of the people of the state, both mental and physical.”

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Sensex, Nifty climb new record highs




The key Indian equity indices continued their record run on Tuesday.

The BSE Sensex touched a fresh high of 52,836.31 and the Nifty50 on the National Stock Exchange hit an all-time high of 15,889.60 points.

Healthy buying was witnessed in banking and realty stocks.

Around 9.40 a.m., Sensex was trading at 52,813.83, higher by 262.3 points or 0.50 per cent from its previous close of 52,551.53 points.

It opened at 52,751.83 and has touched an intra-day low of 52,671.29 points.

The Nifty50 on the National Stock Exchange was at 15,875.05, higher by 63.20 points or 0.4 per cent from its previous close.

The top gainers on the Sensex were Asian Paints, IndusInd Bank and Tata Steel, while the losers were Dr Reddy’s Laboratories, SBI, Titan Company and L&T.

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Fuel price hike paused: Petrol, diesel prices unchanged




The Oil marketing companies paused the hike in fuel prices on Tuesday providing respite to people already burdened with all time high petrol and diesel retail rates.

Accordingly, the price of petrol continues to remain at Rs 96.41 per litre and diesel at Rs 87.28 per litre in Delhi.

OMCs had raised the price of the two petroleum products on Monday to take retail levels at new highs across the country.

In the city of Mumbai, where petrol prices crossed Rs 100 mark for the first time ever on May 29, the fuel price reached new high of Rs 102.58 per litre on Monday. Diesel price also increased to reach Rs 94.70 a litre, the highest among metros. The price levels remain unchanged on Tuesday.

Across the country as well petrol and diesel price rise was paused on Tuesday but its retail prices varied depending on the level of local taxes in different states.

Petrol prices in three other metros apart from Mumbai has also already reached closer to Rs 100 per litre mark and OMC officials said that if international oil prices continue to firm up, this mark could also be breached in other places by month end.

With Tuesday’s price pause, fuel prices have now increased on 24 days and remained unchanged on 22 days since May 1. The 22 increases hasve taken the petrol prices up by Rs 6.01 per litre in Delhi. Similarly, diesel has increased by Rs 6.55 per litre in the national capital.

With global crude prices also rising on a pick up demand and depleting inventories of world’s largest fuel guzzler – the US, retail prices of fuel in India are expected to firm up further in coming days. The benchmark Brent crude is currently close to $74 on ICE or Intercontinental Exchange.

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